Target Outlines $4 Billion Investment Roadmap

Need to Know

• Target will invest roughly $4 billion per year over the next few years in new store openings and infrastructure updates.
• Target has earmarked substantial cash to update its fulfillment capabilities, which will include enhancing the Target app, and opening local fulfillment hubs, called “sortation centers.”
• The digital-focused updates come after a year of record growth for Target, propelled by its strong digital sales and updates to fulfillment infrastructure during the COVID-19 pandemic.
• Target’s 2020 investment in upgrades such as opening new stores and updating existing infrastructure was only $2.65 billion.

Analysis

Target has announced plans to invest about $4 billion annually over the next several years to scale its business, after achieving record growth in 2020.

Many of Target’s updates will center on e-commerce, a part of the business that proved particularly lucrative — and vital — to the company throughout 2020. Target will update its fulfillment capabilities, which will include enhancing and improving its mobile app, increasing the variety of products available for curbside pickup, and opening local fulfillment hubs, which Target is calling “sortation centers.”

The investment in digital-focused capabilities come after a year in which Target saw huge growth, thanks in part to its robust digital infrastructure and fulfillment tools — like Shipt, its delivery service which grew 300% year-over-year in 2020. However, CEO Brian Cornell said in a statement that Target’s record growth in 2020 was not entirely due to the pandemic, but to infrastructure investments, the company had made prior to COVID-19 that allowed it to thrive during coronavirus lockdowns when online shopping and home delivery needs spiked for consumers.

“Following years of investment to build a durable, scalable and sustainable business model, we saw record growth in 2020, as our guests turned to Target to safely provide for their families throughout the pandemic,” Cornell said. “With the strength of our unique, multicategory assortment and the flexibility we offer through our reliable and convenient fulfillment options, we gained nearly $9 billion in market share in 2020 and grew our revenue by $15 billion, which is more than the 11 prior years combined. As we look ahead to 2021 and beyond, we see continued opportunity to invest in our business and our team, building on the strong foundation we’ve established to drive market share gains and deliver profitable growth for years to come.”

In the coming years, Target plans to open 30 to 40 new stores each year and remodel about 150 stores before the holiday season this year, and more than 200 stores per year after that. Target also plans to add two distribution centers this year, one near the New Jersey-Delaware border and one in the Chicago area. The company plans to investigate technology-enabled shelf-stocking strategies and new hubs that will sort packages in order to free up time for employees to pack online orders.

Target saw strong digital sales throughout 2020, culminating in a holiday season that saw digital sales spike 102% year-over-year, with 95% of online orders fulfilled by bricks-and-mortar stores over the holiday shopping period. The company added 10 million online customers in the first six months of 2020, while Target’s loyalty program, Circle, hit 80 million users in November. The company rolled out a number of digital-focused innovations in 2020, including the launch of buy now, pay later payments tech, and the introduction of an in-store reservation system.